In the

United States Court of Appeals
              For the Seventh Circuit

No. 08-1508

U NITED S TATES OF A MERICA,
                                               Plaintiff-Appellee,
                               v.

B RYAN J. SEVERSON,
                                           Defendant-Appellant.


           Appeal from the United States District Court
               for the Western District of Wisconsin.
      No. 3:07-cr-00074-bbc-1—Barbara B. Crabb, Chief Judge.



     A RGUED JANUARY 13, 2009—D ECIDED JUNE 23, 2009




 Before B AUER, P OSNER and R OVNER, Circuit Judges.
  B AUER, Circuit Judge. Bryan J. Severson was convicted
of 28 various counts of money laundering, bank
fraud and bank embezzlement and was sentenced to
140 months’ imprisonment. Severson challenges both his
conviction and sentence. With regard to his convic-
tion, Severson argues that the government failed to
prove his knowledge of illegality on ten counts and that a
deliberate avoidance instruction was improperly given
to the jury. As to his sentence, Severson argues that
2                                              No. 08-1508

the loss was improperly calculated and that prior misde-
meanors erroneously enhanced his criminal history. For
the following reasons, we affirm Severson’s conviction
and sentence.


                   I. BACKGROUND
  Mark Hardyman was the President of the First National
Bank of Blanchardville, Wisconsin (FNBB). FNBB was
an FDIC insured financial institution, regulated by
the Office of the Comptroller of Currency (OCC). In
May 2003, the OCC conducted a regularly scheduled
examination of the bank. The OCC examiners’ review
revealed that there were violations of the bank’s legal
lending limit. The bank examiners determined that the
violations pertained to loans that were not being repaid
but were being renewed, giving the impression that the
loans were not in default. The examiners found that the
violations totaled approximately $14,000,000. The OCC
closed the bank’s doors.
   The FBI investigated FNBB’s closing to determine
whether any criminal statutes had been violated. What
this investigation uncovered was a series of rampant
illegalities orchestrated by bank president Hardyman
that, ultimately, had milked the bank dry.
  With the bank in financial trouble, Hardyman sought
to mask the bank’s dilapidating condition and to present
the illusion of a financially sound bank. For example, his
activities included, but were not limited to, intentionally
misstating information in internal and external reports,
No. 08-1508                                            3

issuing loans without the required Board of Directors
approval, renewing uncollectible, non-paid loans, and
soliciting bank customers to issue fraudulent checks
on essentially non-existent accounts. Severson was a
reoccurring figure in this fraud; we discuss only the
facts relevant to his appeal.
  Severson was the owner of a small tow-truck company
who originally financed his business through FNBB. As
his business grew, Severson started up other small busi-
nesses through similar financing from FNBB. The fact
was, however, that Severson was insolvent, consistently
overdrawn, and yet he repeatedly received loans from
the bank.
  To cover up Severson’s overdrawn status and help
reflect a positive balance on the bank’s books, Severson
and Hardyman conspired to defraud FNBB by having
Severson, through his various companies, issue and
deposit checks without sufficient funding into Severson’s
overdrawn accounts. This scheme proved a cover for
Hardyman and Severson: Hardyman’s bank hid its true
condition and reflected a positive balance; and Severson
covered his insolvency and received loans to which he
would never have been entitled.
  The scheme was hardly subtle. For example, faced with
the need to cover Severson’s overdrafts from an upcoming
scheduled audit, Hardyman and Severson agreed that
David Boyington, one of Severson’s employees, would
write NSF checks for various amounts to Severson. These
checks were ultimately deposited and Hardyman told
Severson that the checks would be deposited into
4                                             No. 08-1508

Severson’s accounts to cover the overdrafts and reflect
positive balances.
   The overdraft coverup continued. Severson wrote nine
NSF checks, drawn on another bank, to cover his over-
drafts. At trial, Hardyman identified a summary chart
listing multiple NSF checks (totaling $824,019.32), drawn
on either Severson’s NSF checks or closed accounts at
the Bank of Cazenovia, that were deposited into
Severson’s accounts at FNBB to cover overdrafts.
  As part of the scheme, Hardyman also loaned money
to the insolvent Severson. For example, Severson desired
additional funding to finance the purchase of a limousine
for one of his businesses. Because the amount already
loaned to Severson had exceeded FNBB’s legal limit,
Hardyman testified that he loaned $18,500 to Jason
Schuepbach, another Severson employee. Hardyman
noted that he discussed with Severson why the trans-
action had to be structured this way and that all parties
understood that the loan would be for Severson. Ulti-
mately, Severson took possession of the limousine.
Hardyman also testified that Severson would be paying
on the loan and no inquiry was made into Schuepbach’s
ability to pay.
  Since this loan, and other loans, were made to insolvent
Severson companies, Hardyman covered the fraud by
altering quarterly reports, so that Severson’s past-due
loans would not be reflected. Hardyman also concealed
Severson’s loans from the FNBB’s Board by making
changes to monthly Board reports prior to Board meet-
ings. At one point, FNBB transferred some of Severson’s
No. 08-1508                                               5

debt to Highland Bank. Hardyman informed Severson
that he was selling some loans to Highland. Although
Severson supplied a financial statement to FNBB,
Hardyman directed Severson to fraudulently amend his
financial statements because they could not give
Highland accurate statements since they “did not
look good from a financial standpoint.” Together, they
changed Severson’s financial statements so that several
of Severson’s loans could be sold to the participating bank.
  NSF checks were also used to make fraudulent pay-
ments on Severson’s loans with FNBB. Severson made
payments on the many loans issued by the bank with
NSF checks to avoid past-due status. Hardyman testified
that he and Severson agreed that Severson would pay
his loans out of his insolvent checking accounts. Again
both benefitted; on the one hand, the bank did not have
to report Severson’s past-due loan to its regulators, as
required; and, on the other hand, Severson received
more money than his credit allowed.
  In January 2003, at the peak of Hardyman and Severson’s
conspiracy, Severson received an unsecured one million
dollar loan from FNBB for the purchase of a racetrack
while his accounts were all overdrawn. The loan was
later secured in May 2003 by a mortgage, prior to an
upcoming audit. OCC examiner Michael Wills testified
that this loan had no viable source of repayment as the
Severson companies that received the loans were insolvent.
  Overall, the gross amount loaned to Severson was
approximately $8.7 million. This amount can be generally
put into two categories: (1) approximately $6.6 million as
6                                            No. 08-1508

proceeds attributable to Severson, which were either
money directly loaned or money used to coverup over-
drafts; and (2) approximately $2.1 million as renewed
loans.
  The grand jury returned a 28-count superseding indict-
ment against Severson for his participation in the
collapse of FNBB. The indictment charged various
counts of bank fraud, bank embezzlement, and money
laundering. Severson was found guilty on all counts.
  During sentencing, the government argued that the
overall loss should be the intended loss, excluding any
collateral presented by Severson. Severson argued that
the money eventually received from the sale of the later-
pledged mortgage on the racetrack loan should be
applied as collateral to reduce the intended loss. The
district court found that the loss amount would be the
full amount of the intended loss ($7,136,461.29); it also
determined that no credit would be given for any
amount received from the racetrack’s sale.
  Ultimately, the district court found that Severson had
a total offense level of 33, with four criminal history
points, and a criminal history category of III. This
history included one point for prior misdemeanor con-
victions. The Sentencing Guidelines ranged from 168 to
210 months; the district court sentenced Severson to
140 months’ imprisonment.
    This timely appeal followed.
No. 08-1508                                              7

                    II. DISCUSSION
  Severson mounts two attacks on his conviction.
He first argues that the government failed to present
sufficient evidence of his knowledge of illegality at
the time he received three certain loans. Severson
also argues that the district court erred by including a
“deliberate avoidance” or “ostrich” jury instruction, which
allowed the jury to infer that Severson knew of
Hardyman’s fraud when he received the loans.
  Severson pursues another two-pronged attack on his
sentence. He argues that the district court miscalculated
the amount at issue when it refused to consider
collateral later pledged as security on a loan and that
the district court improperly calculated his criminal
history level by including prior misdemeanor offenses.


 A. Conviction
  Severson challenges only 10 counts of his conviction,
which all stem from three particular loans made to
Severson. Severson argues that the government failed to
present sufficient evidence that at the time he received
the loans, he was aware that Hardyman had defrauded
the bank’s directors by not seeking their approval.
  A defendant challenging the sufficiency of the evidence
must show that “after viewing the evidence in the light
most favorable to the prosecution,” no rational trier of
fact could have found the essential elements of the crime
beyond a reasonable doubt. United States v. Farris, 

, 618 (7th Cir. 2008) (internal citations omitted).
8                                             No. 08-1508

Moreover, “we will overturn a conviction based on insuf-
ficient evidence only if the record is devoid of evidence
from which a reasonable jury could find guilt beyond a
reasonable doubt.” 

inquiry, we do not weigh
the evidence or second-guess the jury’s credibility deter-
minations. United States v. Stevens, 

, 965
(7th Cir. 2006).
  The 10 appealed counts share a common element.
Counts 9, 10, and 11, which charged bank fraud, required
the government to prove that Severson knowingly aided
and abetted Hardyman in his scheme with the intent to
defraud. 18 U.S.C. § 1344(1) & (2). The second set of
counts (counts 18, 19, and 21) charged Severson with
bank embezzlement. 18 U.S.C. § 656. These three counts
required proof that Severson knowingly aided and
abetted Hardyman’s willful misapplication of bank
money. The last counts (counts 22, 23, 26, and 27) charged
Severson with illegal money laundering. 18 U.S.C. § 1957.
These laundering counts required that Severson
knowingly aided and abetted Hardyman’s unlawful
monetary transactions. Severson’s appeal claims that the
common element of knowledge was not sufficiently
proved.
  The details of each loan that led to these counts are
irrelevant because the challenge to each count is the
same: namely, Severson did not knowingly engage in a
criminal scheme with Hardyman when he accepted the
loans. He specifically argues, with great emphasis, that
the government did not present sufficient evidence to
show that when he received each of the three loans, he
No. 08-1508                                                9

was aware that the bank’s Board had not approved the
loans and that Hardyman was defrauding the bank.
  We do not understand why Severson places such sig-
nificance on whether the Board had approved the loans.
The Board’s knowledge of the illegal loans is not the
issue. The critical issue is Severson’s knowledge and
whether he knew he did not have any funds in his
accounts that would have entitled him to those loans.
  If we look at the record, there is no dispute that Severson
knew he was insolvent. Severson knew his corporate
accounts were continuously overdrawn. At trial,
Hardyman testified that he had discussed with Severson
that Severson would deposit NSF checks to cover his
overdrafts. FBI Special Agent Welshinger also testified
that Severson, after the bank was closed, mentioned that
he knew he operated his accounts in an overdrawn
status. Severson, in short, knew he was broke.
  Moreover, Severson concedes that he wrote, and had
others write, NSF checks to cover his insolvency, creating
the appearance that he had funds. Hardyman testified
that Severson did this at his request and, during the
criminal investigation, Hardyman stated that Severson
knew the bad checks were “worthless.” Severson, who
only reflected a positive account balance by fraud, kept
receiving loans that could never have been legitimately
repaid. This covered his own insolvency, and covered
Hardyman’s fraud. Hardyman stated that he would
credit Severson’s loan payment, even if the check was
written on an overdraft account, to prevent the loans
from being classified as past-due.
10                                              No. 08-1508

  In viewing these facts favorably for the government,
there was enough evidence presented that could lead a
rational trier of fact to find that Severson had an intent
to defraud the bank when he received the three
fraudulent loans that led to his conviction.
  Actually, the jury did not have to determine that
Severson, in receiving the loans, had an intent to de-
fraud. All the jury had to find was that Severson know-
ingly participated in a scheme: that he knew he was
helping Hardyman circumvent the bank’s rules and
federal law; and that he knew he was covering his own
insolvency by his involvement. There is enough evidence
in the record to support the jury’s decision.
   Severson portrayed himself as being naive on these
three loans. Although Severson acknowledges that all
of his other dealings with Hardyman were knowingly
illegal, he suggests that for these three transactions, he
merely followed Hardyman’s instructions without any
idea that Hardyman was behaving fraudulently. How-
ever, this is why the district court gave the ostrich in-
struction. The instruction, which explains to the jury that
guilty knowledge also includes the deliberate avoidance
of knowledge, is appropriate when: (1) the defendant
claims a lack of guilty knowledge; and (2) the facts and
evidence support an inference of deliberate ignorance.
United States v. Carrillo, 

, 769 (7th Cir. 2001).
Deliberate avoidance is not a standard less than knowl-
edge; it is simply another way that knowledge may be
proven. United States v. Carani, 

, 873 (7th Cir.
2007) (citations omitted). We review the district court’s
No. 08-1508                                             11

decision to give the instruction for an abuse of discretion
and, viewing the evidence in the light most favorable
to the government, 

no such abuse.
  Looking at what Severson knew, the instruction was
proper. From the beginning of the scheme, Hardyman
informed Severson that he was over the legal lending
limit, which prompted one of Severson’s loans to be put
in Schuepbach’s name. Severson routinely kited checks;
Severson, at Hardyman’s request, deposited NSF checks
(totaling $824,019.32) drawn on his account from
another bank to cover his overdraft. Severson solicited
one of his employees to write and deposit NSF checks
into Severson’s accounts. Moreover, without any money,
and knowing that his loans were already over the legal
lending limit, Severson received approximately
$8,744,019.62 in loans from the bank and paid them off
with NSF checks.
  With these facts properly supporting the inference of
knowledge, the district court’s instruction was not an
abuse of discretion.


 B. Sentence
  The district court applied various enhancements in
computing the Advisory range under the 2007 Sen-
tencing Guidelines; one was a 20 level offense enhance-
ment because Severson’s conduct culminated in a loss of
more than $7,000,000. See USSG § 2B1.1(b)(1). Severson
claims that the district court erred when it miscal-
culated the intended loss by refusing to subtract the sale
amount of later-pledged collateral on his racetrack loan.
12                                              No. 08-1508

  We review the district court’s interpretation and ap-
plication of the Sentencing Guidelines de novo and its
factual findings for clear error. United States v. Hernandez,

, 746 (7th Cir. 2008). “A finding of fact is
clearly erroneous only if, based upon the entire record,
we are left with the definite and firm conviction that a
mistake has been committed.” 

(internal citations and quotations omitted).
  In determining “Loss,” we consider the greater of the
actual or intended loss. United States v. Brownell, 

, 461 (7th Cir. 2007); see also USSG § 2B1.1, Ap-
plication Note 3(A). Because the intended loss is greater
in our case, we look to Application Note 3(A)(ii) which
defines “intended loss” as (I) “the pecuniary harm that
was intended to result from the offense”; which includes
the (II) “intended pecuniary harm that would have been
impossible or unlikely to occur.” At sentencing, the
government argued that the loss attributed to Severson
totaled $7,136,461. Severson countered that this amount
should have been reduced by the value of the later-
pledged mortgage taken out on the million dollar race-
track loan. After FNBB closed, the FDIC sold the race-
track note to a third party for $707,293.93. As a credit
against the loss, Severson argued that the loss should
be reduced by the amount of the pledged collateral re-
covered. See USSG § 2B1.1, Application Note E (where
collateral has been pledged, loss reduced by the amount
recovered at the time of sentencing from disposition of
the collateral). This, he argued, would result in the loss
totaling $6,429,167.07, enabling only an offense level
enhancement of 18.
No. 08-1508                                              13

   The district court rejected Severson’s argument because
it found that in January 2003, Severson received an unse-
cured loan for a million dollars with no possibility of
repayment; it determined that the intended loss totaled
$7,136,461 and increased Severson’s offense level by 20.
  On appeal, Severson repeats his argument and specifi-
cally argues that for his intended loss, we should not
look at the time the loan was received, but at the time
the fraud was uncovered. If we follow his argument,
Severson did not intend to keep the entire loan because
four months after he received the entire amount, he
pledged collateral to secure the loan and the sale of
the collateral should be reduced from the overall
intended loss.
  In support, Severson cites United States v. Mau, 

, 215-16 (7th Cir. 1995),which held that in a check-
kiting scheme, the moment to determine the loss is the
moment the loss is detected. But, at this juncture, we
are not looking at Severson’s kites, but at what he
intended to keep from the bank when he received an
unsecured million dollar loan. What Severson actually
uses as support is the dicta in Mau, which states that
in calculating the intended loss in a fraudulent loan
case, “the amount of the loan can be offset by the value
of the collateral the bank has or expects to gain at the
time the fraud is discovered.” 

But in Mau,
where the bank discovered the fraud and later had the
defendant sign a note, secured by collateral, to cover the
fraudulent overdrafts, we did not consider the value of
the collateral in the intended loss because the secured
note came after the kite had been discovered.
14                                              No. 08-1508

  There was no error in finding that, in January 2003, at
the time of the fraud, Severson intended to keep the
entire loan; a mortgage was not filed contemporaneously
with the receipt of the loan proceeds. Although, at sen-
tencing, Severson’s counsel stated that Severson would
have testified to his intent to repay, the district court
noted that “[i]f he really intended this to be a legitimate
loan that he was going to repay, he would have filled out
a mortgage at the time he signed it then and there, not
months later when an auditor was approaching.” If we
boil it down, Severson received an unsecured one
million dollar loan that he could not repay. Borrowing
money without the intention to repay is akin to theft. See

(“as in theft cases, loss is the value
of the money, property or services unlawfully
taken”) (citation omitted). The district court did not just
use the face value of the loan; rather it found that
because the idea of repayment was ridiculous,
Severson intended to walk away with the full fraud-
ulently obtained amount. See United States v. Johnson, 

, 172 (7th Cir. 1994). The bank’s risk,
which Severson intended it to risk by knowing he
could not repay, was the total amount.
  Finally, Severson argues that the district court erred
when it included two Wisconsin misdemeanor convic-
tions for dispensing alcohol without a license, see Wis.
Stat. § 125.04(1), in calculating Severson’s criminal history
level. Because this challenge was not made before the
district court, we review the criminal history calculation
only for plain error. United States v. Garrett, 

, 527 (7th Cir. 2008).
No. 08-1508                                             15

  Severson argues that the misdemeanor convictions
should not be counted because they are less serious than
the included, listed crimes in USSG § 4A1.2(c)(1) and
similar to the excluded offenses under USSG § 4A1.2(c)(2).
We can quickly dispose of this argument; the district
court was not absolutely bound by the sentencing com-
mission’s judgment since the Guidelines are merely
advisory. The district court always has the obligation in
the first instance to apply the Guidelines as written
and properly calculate the advisory sentencing range;
then the court’s discretion kicks in and the district court
has the right to, for whatever reason and despite what
we may think, determine that the unlicensed selling of
liquor at a racetrack was more serious than the trivial
crimes listed in § 4A1.2(c)(2). Moreover, even if the
district court erred by including an extra point in
Severson’s criminal history, his 141 month sentence
would still have been below the revised Guideline range
of 151-188 months. United States v. Mount, 

,
265 (7th Cir. 1992) (review of misapplied Guidelines
inappropriate if error was harmless).


                   III. CONCLUSION
  For the reasons discussed above, we A FFIRM Severson’s
conviction and sentence.




                          6-23-09